Raising the Value of the Yuan Would Reduce Inflation in China

The NYT had an article about rising inflation in China. At one point it notes the government's determination to prevent inflation. It then tells readers that higher inflation may reduce pressure from the U.S. to raise the value of the yuan, since higher inflation in China will make Chinese goods relatively less competitive.

It would have been worth noting that a higher valued yuan would help to reduce inflation in China. It would reduce the price of imports thereby putting downward pressure on the price of domestically produced goods. Also, by reducing China's trade surplus, it would slow China's growth.

--Dean Baker

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